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However, he notes that some of the key variables in the two markets may temper the flow through to Auckland and New Zealand this time.

Both New Zealand and Australia have moved to address supply issues in the past few years but Australia has generally been more successful - building more dwellings in relation to population size than we have in New Zealand.

A regional analysis showed that while Auckland building consent issuance "has ramped up considerably over the past few years it pales in comparison to sizeable increases in Sydney".

"This could be one factor resulting in New Zealand house prices outstripping those in Australia," Smith says.

New Zealand house prices have increased five fold since the 1990s (relative to a three-fold increase in Australia) and 80 per cent in the past decade (relative to 45 per cent in Australia).

New Zealand's relatively high levels of immigration may also temper downward pressure.

Also conversely, the slump in Australia has put downward pressure on mortgage rates which has flowed through to the New Zealand market and will help to underpin prices here, he says.

Smith concludes that mortgage rates and net-migration are significant drivers of the New Zealand market.

Australian house prices are more responsive to dwelling supply than New Zealand prices are.

So "currently New Zealand immigration levels and tight local supply may offset the overall link", he says.